S-D

Logic

Service-Dominant Logic:
Clarifications and
Elaborations
Presentation to:
Frontiers in Service Conference
July 1, 2006

Stephen L. Vargo, University of Hawaii at

Manoa

Related Work
S-D
Logic

Vargo, S. L. and R.F. Lusch (2004) Evolving to a New

Dominant Logic of Marketing, Journal of
Marketing, 68 (1),
Harold H. Maynard Award for significant
contribution to marketing theory and thought.
Vargo, S.L. and R. F. Lusch (2004) The Four Service
Myths: Remnants of a Manufacturing Model Journal
of Service Research
Vargo, S.L. and F.W. Morgan (2005) An Historical
Reexamination of the Nature of Exchange: The
Service Perspective, Journal of Macromarketing,
(in PressJune)

Lusch, R.F. and S.L. Vargo, editors (2006), The

Service-Dominant Logic of Marketing: Dialog,
Debate, and Directions, Armonk, NY: M.E. Sharpe
2

Related Work (Continued)

S-D

Logic

Lusch, R.F., S.L. Vargo(2006), The Service-Dominant

Logic of Marketing: Reactions, Reflections, and
Refinements, Marketing Theory, 6 (3),
Lusch, R.F., S.L. Vargo, and M. OBrien (2006),
Competing Through Service: Insights from ServiceDominant Logic, Journal of Retailing, (forthcoming)
Lusch, R.F., S.L. Vargo, and A. Malter (2006), Marketing
as Service-Exchange: Taking a Leadership Role in Global
Marketing Management, Organizational Dynamics,
(forthcoming)
Lush, R. F. and S. L. Vargo, editors (2007) Evolving to a
New Dominant Logic for Marketing: Continuing the
Debate and Dialog, Special Issue of the Journal of the
Academy of Marketing Science, (forthcoming)

S-D Logic: What it is

S-D
Logic

A logic that views service, rather than goods,

as the focus of economic and social exchange

i.e., Service is exchanged for service

Essential Concepts and Components

Service: the application of competences for the

benefit of another entity

Service (singular) is a processdistinct from services,

which implies intangible goods

Shifts focus to operant resources from operand

resources
Value is always co-created
Sees all economies are service economies

All businesses are service businesses

S-D
Logic

Evolution of Marketing
Thought

To Market
(Matter in Motion)

Market To
(Management of
Customers
& Markets )

Through 1950

1950-2005

Market With
(Collaborate with
Customers & Partners
to Create & Sustain
Value)

2005+

Foundational Premises
S-D
Logic

FP1. The application of specialized skill(s) and

knowledge is the fundamental unit of
exchange.

FP2. Indirect exchange masks the

fundamental process of exchange.

Service (application of skills and knowledge) is

exchanged for service

Micro-specialization, intermediaries, and money

obscure the service-for-service nature of exchange

FP3. Goods are distribution mechanisms for

service provision.

Activities render service; things render service

(Gummesson 1995) : goods are appliances

Foundational Premises (2)

S-D
Logic

FP4. Knowledge is the fundamental source

of competitive advantage

FP5. All economies are service economies.

Operant resources, especially know-how, are

the essential component of differentiation
Service only now becoming more apparent
with increased specialization and outsourcing

FP6. The customer is always a co-creator

of value.

There is no value until offering is used

experience and perception are essential to
value determination

Foundational Premises (3)

S-D
Logic

FP7. The enterprise can only make value

propositions.

FP8. A service-centered view is inherently

customer oriented and relational

Since value is always determined by the customer (valuein-use)it can not be embedded through manufacturing
(value-in-exchange)

Operant resources being used for the benefit of the

customer places the customer in the center of value
creation and implies relationship.

FP 9. Organizations exist to combine

specialized competences into complex
service that is demanded in the
marketplace.

The firm is an integrator of macro and microspecializations

Difficult Conceptual
Transitions

S-D
GoodsLogic

Transitional
Concepts

Service-Dominant
Concepts

Services

Service

Goods

Offerings

Experiences

Products

Benefit

Solution

Feature/attribute

Co-production

Co-creation of value

Value-added

Financial Engineering

Financial feedback/learning

Profit maximization

Value delivery

Value proposition

Price

Dynamic systems

Complex adaptive systems

Equilibrium systems

Value-Chain

Supply Chain
Promotion

Integrated Marketing
Communications

Value-creation
network/constellation

To Market

Market to

Market with

Product orientation

Market Orientation

Service-Dominant Logic
(Consumer and relational)

Dominant
Concepts

Dialog

What S-D Logic is Not

S-D
Logic

A Theory

Reflection of the transition to a services era

In S-D logic, all economies are service economies

Justified by the Superior Customer

Responsiveness of Services Companies

S-D logic is a logic, an approach, a lens, but not a theory

Could be used as the foundation for a theory

Services companies just as likely to operate from G-D

logic

Restatement Of The Consumer Orientation

Consumer orientation is evidence of G-D logic, not a fix

to it
Consumer orientation is implied by S-D logic

What S-D Logic is Not (2)

S-D
Logic

Alternative To The Exchange Paradigm

Equating Service with Provision of

Functional Benefits

Problem with exchange paradigm is assumption

of exchange of output, not the notion of
exchange
S-D logic says service (a process) is exchanged
with service

Co-creation of value implies service best

understood in expressive and experiential terms

Applicable only to marketing management

More generally, could serve as foundation for

theory of markets and marketing

Why Service?
S-D
Logic

Accuracy: It is precisely service that we

are talking about

What is exchanged is the application of

specialized knowledge and skills
(competences) for the benefit of another
partyi.e., Service

Thought-leadership: Service marketing

concepts and insights transforming
marketing thought

Transaction Relationship
(Manufactured) Quality Perceived (Service) Quality
Brand Equity Customer Equity
Consumer Prosumer (co-producer of value)
12

Why Service?
S-D
Logic

Continuity: Does not require rejecting

the exchange paradigm

Just change in focus from units of outputs to

processes

Normatively Compelling: The

purpose of economic exchange is
mutual service

Implies managerial, macro, and ethical

standards
Purpose of the firm is to serve

What S-D Logic Might be

S-D
Logic

Foundation of a paradigm shift in

marketing

Perspective for understanding role of

markets in societyTheory of
Markets

Basis for general theory markets and

marketing
Basis for service science
Foundation for theory of the firm
Reorientation for economic theory

S-D
Logic

Thank You!
For More Information on S-D Logic visit:
sdlogic.org
We encourage your comments and input. Will also post:
Working papers
Teaching material
Related Links
Steve
Vargo:
svargo@sdlogic.net
rlusch@sdlogic.net

Bob

Lusch:

S-D
Logic

S-D Logic Can Direct

Macro/Public Policy
From goods to
service(s).
Tax policy to
encourage firms to
retain tangible goods
and sell service flows?

From tangible to
knowledge resources.
Tax policy to
encourage investments
in education and skill
development vs.
housing.

From operand to
operant resources.
Public policy to
encourage collaboration
vs. competition.

From value in exchange

to value in use.
Public data collection
on value in use and
home production.

The Inversion
S-D
Logic

Goods Logic

Service Logic
Service

Products

(processesapplied
competences)

(units of output)

Goods

Services

(Intangible goods)

Indirect

(Goods--Appliances)

Direct

S-D

Logic

Implications of a ServiceExchanged-For-Service
Academic
Paradigm
Unifyingorganized around the common denominator

(mutual service provision)

Unique Marketing Origininternally generated, rather
than inherited
Resource-Centeredbuilds on relative resourceexpanding nature of operand vs. resource-depleting
nature of operant resources
Value-definingshifts focus to value-in use
Logically Divisible--Allows sub-discipline of direct
service provision
Promotes researchprovides clear links among firm,
customer, society, value, etc

Micro implicationsMakes service-based concepts

central/applicable to marketing

IHIP as it applies to value creation/all of marketing

Macro implicationsSocial role of Marketing

Valuecreating
Resource-expanding

18

S-D
Logic

An S-D Logic
Definition of Marketing

Marketing is the process in society

and organizations that facilitates
voluntary exchange through
collaborative relationships that
create reciprocal value through the
application of complementary
resources.

Therefore marketing can be viewed as

the means by which societies are able to
create value through the voluntary
exchange of knowledge and skills.

S-D
Logic

Implications of a ServiceExchanged-For-Service
Practice
Paradigm
Managerially compellingfocuses on mission (service)

Promotes social responsibility

Marketing has social purpose

Education

Easily understandablerequires fewer adjustments

Demands customer orientation/value-in-use

Implies relationship marketing
Role of operant resources
Implies better customer experiences/fairer treatment

Normative prescripts (e.g., customer orientation/relationship)

implied by framework

Invitingincreased attractiveness off discipline

Society

Promotes social responsibilitypurpose is to:

Serve individuals/society/organizations
Facilitate value enhancement/resource expansion through
exchange

Evolving Toward a
Service-Dominant Lexicon
S-D
Logic

G-D Focus

Operand Resources
Tangible
Value Added
Goods
Products
Transactional
Units of Output
Promotion
Brand Equity
Profit Maximization

S-D Focus

Operant Resources
Intangible
Co-creation of value
Service
Experiences
Relational
Processes
Conversation/Dialog
Customer Equity
Financial Feedback

S-D
Logic

Thank You!
For More Information on S-D Logic visit:
sdlogic.org
We encourage your comments and input. If you would like
your working papers or teaching material and/or links to
your research displayed on the website, please e-mail us
Steve
Vargo:
svargo@sdlogic.net
rlusch@sdlogic.net

Bob

Lusch: